The bank says that in at least one part of its operations, namely
administering 401(k) plans and related accounts for companies, it is
making real progress. It attributes its success to pay incentives,
working harder to zero in on the right clients, and training
specialist sales staff.
In terms of the number of plans, it sold nearly three times more to
clients in 2013 than it did a year before, said Bank of America
spokesman Matthew Card. In the first year that it tried to attract
existing banking clients of all sizes, the bank won 750 new
retirement plans compared with the 263 plans it won in 2012.
"We set aggressive goals and this year for 2013 they hit all the
goals," chief executive Brian Moynihan said on a January 15
conference call with analysts, referring to the business.
By other measures, its progress in selling retirement services has
been halting. It won $14 billion of assets from existing clients
last year, up just a touch from 2012's $13.9 billion.
Most of the 2013 growth came from selling smaller plans to smaller
companies. The bank won 470 plans from these clients in 2013
compared to 70 in 2012.
Selling these services is complicated, but Bank of America's efforts
are also critical as the second-largest U.S. bank tries to increase
its revenue. It has a vast customer base — serving one out of every
two U.S. households, for example — making it tough to win new
customers. Instead, the bank under Moynihan is trying to win more
revenue from existing clients, a practice known as "cross-selling."
For decades, banks have tried to cross-sell customers everything
from insurance to wealth management in the hopes of boosting sales.
What they often find is, employees used to selling one kind of
product struggle to sell something different, and setting up systems
to facilitate cross-selling can take some time.
"It's better than it used to be," said one veteran Merrill Lynch
broker of the process to sell more retirement services to current
clients. "It used to be like the Wild West where you just started
chasing companies for 401(k) business. Prospects got pissed because
they had six different people talking to them."
To see how the bank's efforts may be bearing fruit in these kinds of
services, consider the way it won business from a tour bus company
in Hawaii that was already a banking customer.
Mark Perry, a regional executive at the global commercial bank based
in San Francisco, said some of his bankers pitched the company on
what products they could offer. Then a group of brokers from the
bank's Merrill Lynch wealth management unit paid a visit to the bus
company's offices to educate employees on crafting and meeting their
retirement and investment goals. They sealed the deal.
Bank of America is behind rivals in the retirement plan business by
some metrics: it administered $103.9 billion in defined-contribution
benefit plan assets in 2012, less than JPMorgan Chase & Co <JPM.N>
and Wells Fargo & Co <WFC.N>, according to data from Cerulli
Overall, the financial benefit plan business is responsible for more
than $1 billion in annual revenue for the bank. It is impossible to
tell how much the bank's efforts at cross-selling are boosting the
bottom line in this business, but Bank of America officials say that
income from servicing retirement plans helped propel both revenue
and profitability at the bank's global wealth and investment
management division to record levels in 2013. The division accounts
for around 21 percent of the entire company's revenues.
[to top of second column]
Kevin Crain, Bank of America's managing director in retirement and
benefit plans services, has been working for years to figure out how
to convince bankers to sell his product.
In 2010, Crain asked bankers to refer all mid-sized clients to his
division that might be a good fit. His group soon found itself
flooded with referrals "that didn't have a whole lot of life to
them," he said. Crain also heard complaints from bankers that were
hesitant to entrust their clients to different people at Bank of
Then, Crain decided instead to get more focused. He designated
around 125 to 150 Merrill Lynch retail brokers to work directly with
the bankers in presenting Merrill's retirement capabilities to
Brokers took an added interest in selling companies' retirement plan
because when employees switch jobs they often look for a broker to
help them roll over money they have in a 401(k) account into another
type of savings plan, Crain said.
To encourage commercial bankers to buy into the strategy, a
component of their pay started to be based on the total revenue a
client brought to Bank of America. Retirement plans provide a very
good revenue stream that will naturally grow each year once the plan
is sold, so "a banker takes an interest in that," Crain said.
The brokers would sit down with bankers to target businesses that
lie within Bank of America's "sweet spot," Crain said. Those
companies usually had plans ranging from about $5 million to $50
million of assets, and they usually had many different types of
plans, like 401(k)s and health savings accounts, for which they only
wanted one administrator. That gave the bank a shot at multiple
sources of revenue.
CROSS-SELLING NOT SO EASY
Cross-selling is particularly thorny when it comes to bankers that
deal with businesses. A lender might have a relationship with a
company's treasurer or chief financial officer, but decisions about
other products, such as retirement plan services, might be made by
other officials, such as heads of human resources. The banker must
then get to know someone new at the company.
"Just because you have a good relationship with one part of a
client, it doesn't always transfer to the ability to gain mindshare
with other parts of that organization," said Derek De Vries, a bank
analyst at UBS Investment Research.
(Reporting by Peter Rudegeair;
additional reporting by Jed Horowitz; editing by Dan Wilchins and
[© 2014 Thomson Reuters. All rights
Copyright 2014 Reuters. All rights reserved. This material may not be published,
broadcast, rewritten or redistributed.